Auto manufacturers and miners drag down stocks in Europe

European stocks fell sharply yesterday, driven by declines among car makers and mining companies on the back of a weakening market for commodities.

Markets in the Arabian Gulf, however, closed mixed ahead of Eid Al Adha holidays from today.

The Stoxx 600, an index of European stocks, fell 2.4 per cent. The German Dax fell 3 per cent, as Volkswagen headed towards a four-year low, while the FTSE 100 fell 2.2 per cent, with miners hit especially hard.

Volkswagen tumbled 20 per cent, dragging a measure of car makers towards its biggest slump since 2008, after saying it would set aside €6.5 billion (Dh26.62bn) to address compensation related to findings that it routinely cheated on US air pollution tests. Volkswagen shares have lost 35 per cent since last Wednesday.

Peugeot, which is traded on the Paris Euronext, fell 7.2 per cent after France’s finance minister called for a Europe-wide investigation into compliance with emissions standards in the car industry.

The London-listed miners Rio Tinto and BHP Billiton fell by 3.6 per cent and 4.3 per cent respectively, while Glencore fell 12.1 per cent, leading commodity producers to the second-worst performance on the Stoxx Europe 600 Index as prices from coal to zinc slipped. The Bloomberg Commodities index fell 1.1 per cent in trading yesterday.

The benchmark oil measure Brent crude fell to $48.06 per barrel, down 1.8 per cent from its Monday close of $48.92.

Equities remain volatile as investors parse Federal Reserve statements for signals on the trajectory of interest rates after the US central bank last week held its fire amid concerns over global growth. A measure of European stock volatility rose 17 per cent yesterday. The volume of Stoxx 600 shares changing hands was 28 per cent higher than the 30-day average.

“Either investors believe the Fed should have hiked rates and they are trying to force its hand, or they believe that the Fed is genuinely worried about a real problem in global growth and are trying to exit the market,” Ben Kumar, a fund manager who helps to oversee about $14bn at Seven Investment Management, told Bloomberg.

“The price of crude oil is an indicator that investors seem to have latched on to in the past months. When that drops the European markets tend to drop; you’ve also got a bit of stock uncertainty courtesy of Volkswagen.”

The MSCI Emerging Markets index fell 1.7 per cent, driven by declines on eastern European bourses, and on India’s Sensex.

In the Gulf, the Abu Dhabi Securities Exchange rose 0.2 per cent, while the Dubai Financial Market fell 0.8 per cent. The Saudi Tadawul index rose 1 per cent.

* with Bloomberg

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